Wages and the Bargaining Regime under Multi-level Bargaining: Belgium, Denmark and Spain

Transcription

1 DISCUSSION PAPER RIES IZA DP No Wages and the Barganng Regme under Mult-level Barganng: Belgum, Denmark and Span Robert Plasman Mchael Rusnek Franços Rycx March 2006 Forschungsnsttut zur Zukunft der Arbet Insttute for the Study of Labor

2 Wages and the Barganng Regme under Mult-level Barganng: Belgum, Denmark and Span Robert Plasman Free Unversty of Brussels, DULBEA Mchael Rusnek Free Unversty of Brussels, DULBEA Franços Rycx Free Unversty of Brussels, DULBEA and IZA Bonn Dscusson Paper No March 2006 IZA P.O. Box Bonn Germany Phone: Fax: Emal: Ths paper can be downloaded wthout charge at: An ndex to IZA Dscusson Papers s located at: Any opnons expressed here are those of the author(s) and not those of the nsttute. Research dssemnated by IZA may nclude vews on polcy, but the nsttute tself takes no nsttutonal polcy postons. The Insttute for the Study of Labor (IZA) n Bonn s a local and vrtual nternatonal research center and a place of communcaton between scence, poltcs and busness. IZA s an ndependent nonproft company supported by Deutsche Post World Net. The center s assocated wth the Unversty of Bonn and offers a stmulatng research envronment through ts research networks, research support, and vstors and doctoral programs. IZA engages n () orgnal and nternatonally compettve research n all felds of labor economcs, () development of polcy concepts, and () dssemnaton of research results and concepts to the nterested publc. IZA Dscusson Papers often represent prelmnary work and are crculated to encourage dscusson. Ctaton of such a paper should account for ts provsonal character. A revsed verson may be avalable drectly from the author.

3 IZA Dscusson Paper No March 2006 ABSTRACT Wages and the Barganng Regme under Mult-level Barganng: Belgum, Denmark and Span * Usng a unque harmonzed matched employer-employee dataset (European Structure of Earnngs Survey, 1995), we study the mpact of the regme of collectve barganng on wages n the manufacturng sector of three countres that are characterzed by a mult-level system of barganng: Belgum, Denmark and Span. Our fndngs show that, compared to multemployer barganng, sngle-employer barganng has a postve effect both on wage levels and on wage dsperson n Belgum and n Denmark. In Span, sngle-employer barganng also ncreases wage levels but reduces wage dsperson. Our nterpretaton s that n Belgum and Denmark, sngle-employer barganng s used to adapt pay to the specfc needs of the frm whle, n Span, t s manly used by trade unons n order to compress the wage dstrbuton. JEL Classfcaton: Keywords: J31, J51, J52 collectve barganng, wage structure Correspondng author: Franços Rycx Unversté Lbre de Bruxelles CP 140 Av. F.D. Roosevelt 50 B-1050 Brussels Belgum Emal: frycx@ulb.ac.be * Ths paper s produced as part of a Targeted Soco-Economc Research (TR) project on Pay Inequaltes and Economc Performance (PEP) fnanced by the European Commsson (Contract HP-CP , It has evolved form earler drafts presented at workshops n Mannhem (LoWER annual conference 2005), San Francsco (SOLE/EALE 2 nd world conference) and Brussels (DULBEA). We would lke to thank all semnar partcpants and more partcularly Mchael Burda and Claudo Lucfora for ther comments and suggestons. The usual dsclamer apples.

4 1. Introducton Insttutons consttute an mportant determnant of the shape of the wage structure. Research n ths feld manly reles on cross-country comparsons that show that the more centralzed and/or coordnated the wage settng system, the more compressed s the wage dstrbuton (Teulngs and Hartog, 1998; Wallersten, 1999; Blau and Kahn, 2002). Ths s due to two factors. Wthn centralzed countres, mult-employer agreements set mnmum wages that ncrease wages at the bottom of the wage dstrbuton. In addton, mult-employer barganng coordnates wage settng so nter-ndustry and nter-frm wage dfferentals are lower than n less coordnated systems of collectve barganng. Research nto the wage structure effect of the dfferent barganng regmes wthn countres where mult-employer barganng s the prevalent barganng mode, whch s the case n most western European countres, s much less extensve and produces more heterogeneous results. Under such settng, most workers, rrespectve of ther unon status, are covered by a natonwde and/or ndustry-wde multemployer agreement whch sets mnmum wages for defned categores of workers. Wage barganng may also occur at the frm and/or at the establshment level generally to ncrease wages above the natonal or ndustry standards. It s nterestng to know the wage structure effect of the dfferent barganng regmes under mult-level barganng n a context where many actors (ncludng OECD 3 and European Commsson 4 ) are n favor of gvng more weght to sngle-employer and less to mult-employer barganng n the process of wage determnaton. Prevous studes have shown that sngle-employer barganng ncreases wage levels relatve to mult-employer barganng (Dell Arnga and Lucfora, 1994a; Hartog et al, 2002; Rycx, 2003; Cardoso and Portugal, 2003; Palenzuela and Jmeno, 1996). Fndngs concernng the effect of the barganng regme on the dsperson of wages are much more heterogeneous. Theoretcally, the dsperson of wages s expected to be hgher for workers covered by sngleemployer agreements because they may ncrease nter-frm wage dfferentals by takng nto account frm-specfc characterstcs and local economc condtons. Ths s what was observed n Sweden by Hbbs and Lockng (1996) who found that the senstvty of wage changes to local market condtons was sgnfcantly hgher after the move from central to ndustry and local barganng n 1982 and that wage dsperson has been ncreasng snce that year. For Belgum, Rycx (2003) found a lower dsperson of nter-ndustry wage dfferentals for frms covered only by a mult-employer agreement, compared to frms covered addtonally by a sngle-employer agreement. Ths fndng suggests that rent-sharng or effcency wage practces are more present when there s a frm-specfc agreement and that t ncreases the dsperson of wages. For Portugal, Cardoso and Portugal (2003) found that the returns to workers and frms characterstcs are larger when the actual wage s the dependent varable of the earnngs equaton, compared to the stuaton where the barganed wage s the dependent varable. They concluded that wage drft works as a mechansm to overcome the constrants mposed by mult-employer barganng, allowng frms wder scope for acton n ther wage polcy. Other studes exhbt the opposte results. Dell Arnga and Lucfora (1994b) found that local wage barganng sgnfcantly reduces the wage dsperson across establshments n Italy. They nterpreted ths result as the sgn of a greater desre for wage standardzaton n establshments covered by a frm collectve agreement. Checch and Pagan (2004) also found that, by reducng the prces of frms and ndvduals characterstcs, local barganng reduces wage nequalty n Italy. Other papers have focused on the effect of the 3 OECD (2004). 4 European Commsson (2004). 2

5 barganng regme on the wage dsperson wthn frms. Accordng to Rodrguez (2001), the wage structure wthn the frm s the result of a barganng process between the unon delegaton and the employer who have opposte preferences. The utlty of trade unons rses wth wage level and wage compresson, whle employers prefer wage dsperson. The wage compresson effect of unonsm has been wdely tested n Anglo-Saxon countres (see for example Freeman, 1980). For Italy, Dell Arnga and Lucfora (1994b) found that the wthnfrm wage dsperson decreases sgnfcantly as unon densty rses. A smlar result has been found by Rodrguez (2001) for frms covered by a frm agreement n Span. The employer s preference for wage dsperson wthn the frm must be lnked to the Tournament theory (see Lazear and Rosen, 1981) whch predcts that a more dspersed wage structure (e.g. by the ntroducton of performance pay practces or by rasng wage dfferentals between occupatons) may provde ncentves for workers to ncrease ther effort. Dell Arnga and Lucfora (1994b) found no dfference n wthn-frm wage dsperson between frms covered only by a mult-employer agreement and frms covered addtonally by a frm-level agreement. Conversely, Domnguez and Rodrguez (2004) found that frm-level collectve barganng reduces the wthn-frm wage dsperson when compared wth ndustry-level barganng n Span. They attrbuted ths result to the acton of unons. Fnally, Dell Arnga et al (2004), studyng the effect of the barganng regme on the wthn-establshment wage nequalty n Italy, Span, Belgum and Ireland, found frst a larger wthn-establshment nequalty for establshments covered by a sngle-employer agreement. However, when a larger set of controls was ncluded, the assocaton was nverted or became statstcally nsgnfcant. To sum up, ths lterature revew shows that, compared to mult-employer barganng, sngle-employer barganng may ncrease or decrease wage dsperson, and ths may happen through the modfcaton of nter-frm wage dfferentals and/or the wthn-frm wage dsperson. Wthout mult-country comparson, t s mpossble to know f ths dvergence n results s due to natonal dfferences or to the use of dfferent data and methodologes. In ths paper we study the wage structure effect of the dfferent barganng regmes n the manufacturng sector n Belgum, Denmark and Span. More precsely, we compare the wage dsperson (standard devaton and nter-decles wage dfferentals) and the wage levels between workers covered by a mult-employer agreement and workers covered by a sngleemployer agreement 5. We use a unque harmonzed mult-country dataset (European Structure of Earnngs Survey, 1995) whch contans detaled nformaton about wages, workers and employers characterstcs, and the level(s) of collectve agreement coverng each frm. Although matched employer-employee datasets are now avalable for a number of ndvdual countres, to the best of our knowledge, the ES s the only mult-country dataset wth matched employer-employee data. Ths study s the frst mult-country comparson of the total effect (on wage level and on wage dsperson, both wthn and between frms) of the barganng regme on wages n countres characterzed by a mult-level barganng system. Secton 2 presents the nsttutonal framework n the three countres analyzed. Secton 3 shows the data. The methodology and emprcal results are presented n secton 4. The last secton concludes. 5 For Belgum and Denmark, sngle-employer agreements always complement mult-employer agreements. In Span, the two regmes are mutually exclusve. 3

6 2. Insttutonal framework The three countres analyzed n ths paper have n common that wages may be barganed at more than one level. However, they dffer n many other aspects. Ths secton provdes a short descrpton of the collectve barganng system n place n those countres. We also lnk the theoretcal arguments presented n the prevous secton to the country s nsttutonal characterstcs n order to derve some expectaton about the emprcal results. In Belgum and Denmark, collectve barganng occurs at three levels n a herarchcal way, such that an agreement at one level cannot be less favorable than hgher-level agreements. Intersectoral agreements cover the whole country. They set natonal mnmum wages and a margn for wage ncreases and defne the framework for the subsequent barganng levels. Industry agreements sets ndustry standards (.e. mnmum wages by category of worker) for most of the employees n the ndustry concerned. Then, these mnmal workng condtons may eventually be ncreased at the level of the frm or establshment by a sngle-employer agreement. The mportance of each level n the wage settng process has vared over tme. Untl the 1980s, wages were manly determned by ndustry agreements. In the late 1960s, sngle-employer barganng expanded, manly because shopfloor labor movements were seekng to gan pay ncreases n excess of hgher-level standard rates (Traxler et al., 2001). The economc crss that followed the two ol shocks led employers n many countres to call for more flexble workng condtons. It led to a second wave of barganng decentralzaton n the md-1980s wth decentralzaton on workng tme, and to a thrd wave n the 1990s that was ntated by employers n order to talor wages more strctly to the performance of the ndvdual frm (Traxler et al, 2001). Because Belgum and Denmark were both small, open economes, they were severely ht by the economc crss. In Denmark, there was a shft n many ndustry agreements from the standard rate system, where wages actually earned are those set by the ndustry collectve agreement, to the mnmum pay system, where only mnmum wages are defned at the ndustry level. Between 1989 and 1995, the percentage of workers covered by the mnmum pay system jumped from 30% to 61% (Andersen, 2003). Pay ncreases at the sngle-employer level take often the form of a pay-sum barganng : the aggregate sze of the pay ncrease s determned by collectve barganng but ts allocaton s left to the management (Traxler et al, 2001). In addton, the ndexaton mechansm was abolshed n 1982, whch reduced macroeconomc wage ncreases. In Belgum, the determnaton of pay was also shftng from the ndustry to the sngleemployer level. An exploson n company agreements took place n the early 1980s. Between 1980 and 1985, the number of frm agreements rose from 341 to It declned after ths perod and stablzed around 2000 n the 1990s (Van Ruysseveldt & Vsser, 1996). In order to preserve the compettveness of Belgan frms, the government froze prvate sector wages for the perods and In 1983, a law stpulated that wage costs could not rse by more than the average ncrease n the country s major tradng partners. The automatc lnk between prces and wages stayed n place, although the system changed n order to reduce macroeconomc wage ncreases (e.g. by excludng products lke fuel, tobacco and alcohol from the prce ndex). In short, n both countres, macroeconomc wage ncreases were reduced and there was a shft from mult-employer to sngle-employer barganng. Because sngle-employer agreements cannot set wages below natonal and ndustry standards, wages levels should on average, n both countres, be hgher when there s a sngle-employer 4

7 agreement n addton to the mult-employer agreement. We also expect nter-frm wage dfferentals to be hgher for frms covered by a sngle-employer agreement because they can take nto account frm-specfc characterstcs (e.g. frm sze, proft, regon) that are generally not among the crtera that defne ndustry and natonal standards (those crtera are prncpally age, experence and occupaton). Fnally, the presence of a frm agreement may be expected to ncrease the wage dsperson wthn the frm, because n the 1990s many frm agreements were ntated by employers n order to ntroduce new flexble pay practces. In Span, there was no ntersectoral agreement at the tme of the survey 6. Workng condtons were ether determned by an ndustry agreement or by a company agreement. Followng the no competton prncple, the two regmes deal wth the same type of subjects and there s no dvson of responsblty between them (Alarçon, 1997). Therefore, by contrast wth Belgum and Denmark, when a frm s covered by a company agreement, t s not constraned by the agreement set at the ndustry-level 7. These condtons have been n place snce the legalzaton of collectve barganng n Untl the death of Franco n 1975, collectve barganng was strongly controlled by the government. Industry agreements, that covered most of the workforce, were much less respected than company agreements whch were the result of almost free collectve barganng. Ths s why trade unons (whch were llegal durng ths perod 8 ) attached much more mportance to frm-level barganng, whch was also used as a tool for worker moblzaton and for poltcal struggle (Tohara, 1986). The percentage of the workforce covered by company agreements s very stable over tme. Durng the 1990s, whle an expanson of sngle-employer agreements occurred n many countres, the percentage of company agreements slghtly decreased n Span. In 1990, 15% of employees were covered by a company agreement. In 2001, ths fgure was only 11%. At the same tme the percentage of workers covered by ndustry agreements rose from 85% to 89%. In fact, the call for more pay flexblty gave frms covered by an ndustry agreement the opportunty to pay wages below ndustry standards n the case of a company crss 9. Therefore, the exstence of a company agreement s stll assocated wth a trade unon presence wthn the frm. Accordng to Garca and Mallo (2002), more than 80% of collectve agreements at plant/frm level are ntated by works councls. They conclude that the exstence of ths sort of agreement s a proxy varable for an organzed acton of workers representatves 10. Rodrguez (2001) reports, for the perod , an average unon densty rate of 36% n frms covered by a company agreement. Ths fgure must be compared wth the natonal average of 11% 11 (OECD, 2004). Another characterstc of company agreements s that they are more often concluded n large frms (Izquerdo et al, 2003), so where unons are tradtonally better organzed. Because there s a large dfference n trade unon barganng power between company agreements and ndustry agreements, and because those two regmes are mutually exclusve, the wage structure effect of the barganng regme n Span somewhat resembles the wage structure effect of unonsm n Anglo Saxon countres. We would therefore expect wages to be hgher when the frm s covered by a company agreement. We would also expect the wthn-frm wage dsperson to be lower under the company agreement regme than under the ndustry agreement regme. Another argument explanng why company agreements 6 Intersectoral agreements took place between 1977 and They were rentroduced n The 1997 ntersectoral agreement has mproved co-ordnaton between the dfferent barganng regmes. 8 Collectve barganng took place between employers and works councls. 9 The so-called opt-out clauses n place snce the 1994 reform. 10 Garca and Mallo (2002), p Company agreements cover 15% of workers. Accordng to ths, the average unon densty rate n frms covered by an ndustry agreement should be 7%. 5

8 should decrease the wthn-frm wage dsperson s ponted out by Domnguez and Rodrguez (2004): unon representatves at the ndustry level bargan wthout feelng the drect pressure of ther afflates and ths may lead them to relax the goal of reducng the dsperson of wages. In frms covered by a company agreement, representatves bargan under the close supervson of ther unon colleagues, who are prmarly low-pad, unsklled workers, so they generally seek to gan hgher wage ncreases than ther non afflated, sklled colleagues. Inter-frm wage dfferentals may also be lower under the company agreement regme because of the trade unon desre for wage standardzaton. Moreover, a majorty of ndustry agreements are regonal or provncal. In 1995, 59% of all workers covered by a collectve agreement were covered by a local, provncal or regonal ndustry agreement whle natonal ndustry agreements covered only 27% of all workers (Izqerdo et al, 2003). Large frms, whch may have establshments n dfferent regons, are often covered by a company agreement. It wll set dentcal workng condtons for the dfferent regonal establshments. So regonal wage dfferentals may be lower under company agreement than under ndustry agreement. 3. Data Ths study s based upon the 1995 European Structure of Earnngs Survey (ES 1995), produced by Eurostat. Ths unque harmonzed survey contans a wealth of nformaton, provded by the management of establshments, both on the characterstcs of the latter (e.g. sector of actvty, number of workers, regon, form of economc control) and on the ndvduals they employ (e.g. age, level of educaton, pad hours, gender, occupaton). It s representatve of all establshments employng at least ten workers and whose economc actvtes fall wthn sectons C to K of the Nace Rev. 1 nomenclature. Wage data are very relable (provded by the management) and contan annual bonuses. Ths last nformaton s relevant to our study because n many sngle-employer agreements, wage ncreases are pad through annual bonuses (e.g. 13 th month, proft sharng, productvty premum). Ths dataset provdes nformaton on the level(s) of collectve agreement coverng each establshment. Hence, we are able to dstngush workers covered only by a mult-employer collectve agreement, at the mult-ndustry and/or ndustry level, and workers covered (n addton to the mult-employer agreement n Belgum and Denmark) by a sngle-employer agreement, at the level of the frm and/or establshment. We restrct our analyss to the manufacturng sector because we wsh to estmate the effects of the barganng regme on a sample of homogeneous ndvduals. Indeed, we thnk that these effects may dffer greatly dependng on the type of frm, worker, and ndustry agreement. Moreover, the manufacturng sector s the key barganng sector n Denmark. Its agreements chart the course for agreements n other sectors (Andersen and Maland, 2005). We also exclude workers who are not covered by any agreement, as well as agreements that cannot be classfed as sngle or mult-employer agreements 12. Fnally, we exclude workers belongng to a category (an occupaton or ndustry) not present n one of the two regmes wthn a country. In total, ths corresponds to a reducton of 7%, 6% and 2% respectvely for the Belgan, Dansh and Spansh samples. The descrptve statstcs are presented n the appendx. In all three countres, wages are on average sgnfcantly hgher under sngle-employer agreements than under mult-employer agreements. The standard devaton of log wages s smaller under sngle-employer than under mult-employer agreements n Span. The opposte result s found for Denmark. No 12 For nstance, an ndustry may contan a sngle frm. In ths case, the collectve agreement s both sngle and mult-employer. 6

9 sgnfcant dfference n standard devaton can be seen for Belgum. Among human captal varables, we note that potental experence s larger under mult-employer barganng than under sngle-employer barganng n all three countres. The level of schoolng s hgher under sngle-employer barganng n Denmark and Span but the nverse s true for Belgum. Senorty n the company s on average 6 years greater under company agreements than under ndustry agreements n Span, whle the dfference n senorty between the two regmes s much smaller n Belgum (3 years) and n Denmark (less than one year). Ths s n lne wth Garca and Malo (2002) who found that frms wth company agreements n Span had sgnfcantly lower qut rates than frms under ndustry agreement. They nterpreted ths result as a consequence of a voce effect. When workers, by means of works councls or unon delegatons, have a voce to express dscontent, they qut less frequently and job tenure s longer. We also observe that the percentage of female workers s larger under mult-employer barganng n Belgum and Span but the nverse s true for Denmark. Concernng job characterstcs, there s a very large dfference n the percentage of workers employed on fxed term contracts between the two regmes n Span (10% under frm agreements compared to 26% under ndustry agreements). Ths llustrates the fact that, n Span, workng condtons are very dfferent between the two regmes. In Belgum and Denmark, the percentage of workers employed on fxed term contracts does not exceed 3% n both regmes. We can also note that, n all three countres, the percentage of full tme workers s larger under sngleemployer barganng. In Span and Belgum, the percentage of workers who have done shft, nght or weekend work, and who have done overtme hours, s larger under sngle-employer barganng. The nverse s true for Denmark. Concernng frm characterstcs, we observe that the number of employees s, on average, sgnfcantly larger n frms that sgn ther own collectve agreement n all three countres. Ths may be due to the fact that workers are generally better organzed n large frms. Fnally, we see that, n Belgum and Span, frms are more often publcly owned when there s a sngle-employer agreement. Accordng to Domnguez and Rodrguez (2004), the proporton of trade unon members s greater when the frm s publcly owned n Span. In our sample, all frms n both regmes are prvately owned n Denmark. 4. Estmaton 5.1. Estmaton procedure If the barganng regme has an effect on the wage structure, that s because t affects the prces of frms and workers characterstcs. Therefore, we base our measurements of the wage structure effect of the barganng regme on the dfferences n those prces between the two regmes. We begn by estmatng separate Mncer-type wage equatons by barganng regmes. e ln W = X β + e (1) ln W = X β + (2) W s the wage of the th worker n each barganng regme (sngle-employer barganng () and mult-employer barganng ()). X s a vector of worker, frm and job characterstcs: years of senorty (smple and squared), years of potental experence (smple, squared and 7

10 cubed) 13, logarthm of years of schoolng, dummes for gender, for the types of contract (fxed/unlmted, full/part tme), f the ndvdual supervses the work of hs coworkers, f the ndvdual has done shft, nght or weekend work, f the ndvdual has done overtme hours, dummes for occupatons, logarthm of the number of employees n the establshment, dummes for the type of economc control, for the regon where the establshment s located and dummes ndcatng the ndustry. β s the vector of the parameters to be estmated and e s the error term. Those wage equatons are estmated by ordnary least squares wth Whte (1980) heteroscedastcty consstent standard errors. These coeffcent estmates are used n the next stages to estmate the effects of the barganng regme on the average wage and on the dsperson of wages. In order to estmate the effect of the barganng regme on the wage levels, we decompose the dfference n mean (log) wages between the two regmes nto two components. lnw ˆ ln '( ) '( ˆ ˆ W = β X X + X β β ) (3) where X and X are the vectors of mean characterstcs respectvely across the sngleemployer and the mult-employer agreement workers. The frst component on the rght-hand sde of the equaton s the dfference n mean wages that s due to dfferences n observed characterstcs between the two regmes. The second component s the dfference n mean wages that s due to dfferences n the wage equatons coeffcents between the two regmes. Followng Stewart (1987), we consder ths last component as the effect of the barganng regme on average wages. More precsely, t measures the mpact on the average wage of the dfferences n the prces of observed frms and workers characterstcs between the two regmes. Standard errors from Stewart (1987) are used for the statstcal nferences. ( ˆ λ ) = X ' VX (4) where ˆ ˆ ) ( ˆ ( ) ( ˆ V = Var β β = Var β + Var β ) In order to estmate the effect of the barganng regme on the wage dsperson, we use the method of Juhn et al. (1993). Ths method conssts n constructng wage counterfactuals for each ndvdual, and then computng dstrbutonal statstcs from the counterfactual wage dstrbutons obtaned. Frst, we must express equatons (1) and (2) n the followng forms: lnw lnw 1 1 F ( θ = X β + F ( θ ) (5) = X β + ) (6) 13 Potental experence = Age years of schoolng In order to obtan ths second wage counterfactual, we must construct F ( θ ) for all workers n the sngle-employer agreement sample. We followed the mputaton method presented n Lemeux (2002). The dea s to frst compute the rank θ from the emprcal dstrbuton of the resduals and then select the resdual at the same rank n the emprcal dstrbuton of resduals n the mult-employer agreement sample. Because the number of observatons s not the same n both samples, we dscretzed the dstrbuton of resduals nto 1000 percentles, and we replaced the actual resdual by the average resdual n each percentle. 8

11 1 θ 1 θ where F ( ) = e and F ( ) = e ; F and F are the nverse of the cumulatve dstrbuton of the resduals respectvely n the sngle-employer agreement and n the mult-employer agreement sample; θ s the rank of the resdual of the th ndvdual n the resdual dstrbuton. Then, we construct two types of counterfactual wages for each sngleemployer agreement worker: lnw lnw ( 1) 1 ( 2) 1 X β + F ( θ = X β + F ( θ ) (7) = ) (8) 1 1 (1) lnw s the log wage of the sngle-employer agreement workers f they were remunerated lke the mult-employer agreement worker and s obtaned by usng the coeffcents from the (2) earnngs equaton estmated n the mult-employer agreement sample; lnw s the log wage of the sngle-employer agreement workers f, n addton, ther resduals were dstrbuted as for the mult-employer agreement workers 15. Once we have these four log wage dstrbutons (ln w ; ln w ; ln w (1) ; ln w (2) ), we can construct dstrbutonal statstcs for each of them. Consder the statstcs G (e.g. G = standard devaton, P90-P10, P50-P10 or P90-P50). The dfference n G between sngle-employer agreements and mult-employer agreements may be decomposed nto three components: G(ln w ) G(ln w ) = G(ln w ( 2) ) G(ln w + G(ln w ) G(ln w (1) ( 1) (2) + G(ln w ) G(ln w ) ) ) (9) The frst component on the rght-hand sde of the equaton s the dfference n G due to dfferences n observed and unobserved characterstcs; the second s the dfference n G due to dfferences n wage equaton coeffcents (.e. the dfference n the prce of the observed characterstcs); the thrd s the dfference n G due to dfferences n the prces of unobserved characterstcs. We defne the effect of the barganng regme on G as the sum of the two last components, so the dfference n G that s due to dfferences n the prces of observed and unobserved characterstcs. We estmate the effect of the barganng regme on the standard devaton, the 90-10, the and the percentle dfferentals Estmaton results Wage equatons We begn by analyzng the results of the wage equatons estmated separately for workers covered by sngle-employer barganng and for workers covered by mult-employer barganng. They are presented n the appendx. The large R² ndcates a good goodness of ft and the sgns of the coeffcents are n lne wth theoretcal expectatons. The level of educaton exercses a sgnfcant and postve nfluence upon wages n all three countres. There s a concave relaton between the wages and the pror potental experence of a worker. The relatonshp between wages and tenure s also n the form of a bell. The dummy varable relatng to gender suggests that, ceters parbus, women are pad wages lower than those of men. We also observe a wage dfferental n favor of ndvduals managng other employees 9

12 (when ths varable exsts). Fnally, there s a postve correlaton between wages and the sze of the frm. More nterestng are the dfferences n the coeffcents between the two regmes. Among human captal varables, only the return to potental experence exhbts no sgnfcant dfference between the two regmes for any of the three countres. The return to senorty s smaller under sngle-employer agreements n Belgum and Span (by respectvely 0.2 and 0.4%). But t s larger by 0.8% under sngle-employer agreements n Denmark. Ths s n lne wth the study by Bngley and Westergaard - Nelsen (2003) who found that the return to tenure has ncreased snce the begnnng of the barganng decentralzaton movement n the 1990s. Ther explanaton s that tenure was very low n Denmark, compared to the other OECD countres 16. Employers have taken the opportunty afforded by a more decentralzed system to rase the return to tenure n order to ncrease the attachment of workers to ther frms. Decentralzed barganng seems to reward better human captal characterstcs n Belgum and Denmark, as shown by the dfference n the coeffcent of the years of educaton. The dfference s not statstcally sgnfcant n Span. The wage penalty for female workers s smaller (by 2%) under sngle-employer agreements n Span. The gender wage gap that results from ndustry barganng s very wde n Span (20%, compared to 16% n Belgum and 9% n Denmark). So unons, by means of sngle-employer agreements, may seek to close ths gap. Sngle-employer agreements ncrease the gender wage gap n Denmark (by 1%), but the gap under ths regme s stll lower than n the two other countres. The dfference s statstcally nsgnfcant n Belgum. An analyss of the effects of the barganng regmes on wage dfferentals between occupatons reveals nterestng results. The occupaton of reference s machne operators and assemblers, the largest blue collar occupatonal group. In Denmark, 12 occupatons ncrease ther poston relatve to the reference when a sngle-employer agreement s concluded n addton to the mult-employer agreement. Among those occupatons, 8 were already better pad than the reference when only a mult-employer agreement was n place. In addton, most of them are whte collar occupatons. Inversely, 2 of the 3 occupatonal groups whose postons worsened under a sngle-employer agreement are blue collar occupatons. Hence, t seems that, n Denmark, sngle-employer agreements wden the nter-occupaton wage dfferentals and mostly beneft whte collar workers. In Span, on the contrary, sngle-employer agreements seem to reduce the wage dfferentals between occupatons. The 3 occupatonal groups that ncrease ther poston by swtchng from multemployer to sngle-employer agreements were pad less than or equal to the reference under mult-employer agreements. Inversely, the 4 groups that worsen ther poston under sngleemployer agreements were better pad than the reference under mult-employer agreements. 3 of them are whte collar occupatons. Ths may be explaned by trade unons actons under company agreements that seek to ncrease relatvely more the wages of ther members who are tradtonally low pad, unsklled workers. Surprsngly, t seems that, n Belgum also, sngle-employer agreements reduce the wage dfferentals between occupatons. 5 out of the 6 groups that have mproved ther poston by beng covered by a sngle-employer agreement n addton to the mult-employer agreement were pad less than the reference under multemployer agreement. The opposte s true for the two groups that have worsened ther poston. The return to frm sze s larger under sngle-employer agreements than under multemployer agreements n Belgum and n Denmark. It ndcates for those two countres that frm-specfc characterstcs (at least frm sze) are better taken nto account under sngle- 16 Wth an average tenure of 7.9 years, Denmark s placed together wth the Anglo Saxon countres. Denmark s also n the group wth the lowest fracton of those who have more than 10 years of tenure (Bngley and Westergaard-Nelsen, 2003). 10

13 employer agreements. The fact that the nverse s found n Span may be a sgn of the unon polcy of wage standardzaton between frms. Fnally, we observe that n Span, the wage penalty relatve to the reference regon East s larger under mult-employer agreements than under sngle-employer agreements n 4 regons. The dfference s not statstcally sgnfcant for the 2 other regons. So regonal wage dfferentals seem to be larger under mult-employer agreements than under sngle-employer agreements n Span. Ths may be explaned by the fact that mult-employer agreements are often regonal or provncal. On the contrary, sngleemployer agreements may cover large frms that have establshments n dfferent regons, thus defnng dentcal workng condtons for the dfferent regonal establshments Effect of the barganng regme on wage levels [Table 1 about here] We see from table 1 that wages are on average hgher under sngle-employer agreements than under mult-employer agreements even f we control for dfferences n observed characterstcs. The wage dfferentals are around 4% wthout statstcally sgnfcant dfferences between the countres. Ths result s not surprsng for Belgum and Denmark because sngle-employer agreements can only mprove the workng condtons set at the upper barganng levels. It s n the range of prevous fndngs for mult-level barganng systems: 4.4% and 7.5% respectvely for blue and whte collar workers n Italy (Dell Arnga and Lucfora, 1994a), 0.5% n the Netherlands (Hartog et al, 2002), 5.1% n Belgum (Rycx, 2003) and 1.6% n Portugal (Cardoso and Portugal, 2003). In Span, because frm agreements are not constraned by ndustry agreements, ths result may be due to stronger unon barganng power n companes covered by a company agreement than n those covered by an ndustry agreement. It s lne wth the wage dfferental of 5% found by Palenzuela and Jmeno (1996) Effect of the barganng regme on wage dsperson [Table 2 about here] In Denmark, wthout controllng for dfferences n the dstrbuton of characterstcs, sngleemployer agreements ncrease the standard devaton of wages by 0.030, relatve to multemployer agreements. In Span and Belgum, sngle-employer agreements reduce the standard devaton respectvely by and Because, n Denmark, the characterstcs under frm agreements are more heterogeneously dstrbuted, the ncrease n the standard devaton by sngle-employer agreement becomes slghtly smaller (0.022) when dfferences n characterstcs are controlled for. In Belgum and Span, on the contrary, the dstrbuton of characterstcs s more compressed under sngle-employer agreements than under multemployer agreements. Consequently, the reducton n the standard devaton of wages by sngle-employer agreement s smaller n Span (0.027) when we control for dfferences n characterstcs. In Belgum, when dfferences n characterstcs are controlled for, sngleemployer agreements ncrease the standard devaton of wages by The same knd of results are found when we analyze the effect of the barganng regme on the percentle wage dfferental. Controllng for dfferences n characterstcs, sngle- 11

14 employer agreements ncrease the percentle wage dfferental by and respectvely n Belgum and n Denmark. In Span, sngle-employer agreements reduce the percentle wage dfferental by The comparson of the effect of the barganng regme on the and on the percentle dfferentals shows that, n Denmark, ths effect s smlar (0.042) n the lower-half part and n the upper-half part of the wage dstrbuton. In Belgum, the ncrease n wage dsperson s only due to an ncrease (of 0.023) n the upper-half part of the wage dstrbuton. Frm agreements n fact very slghtly reduce (by 0.001) the wage dsperson n the lower-half part. Ths may be lnked to the fact that the occupatons that see ther wages ncreased under sngle-employer agreements are manly low pad occupatons. In Span, almost all of the reducton n the wage dsperson by frm agreement takes place n the lower-half part of the wage dstrbuton (0.071 n the lower part and n the upper part). Ths may mean that the wage gans of beng covered by a sngleemployer agreement beneft most partcularly the lowest pad workers, whch, agan, may be attrbuted to trade unon actons 17. To sum up, frm agreements, as compared wth mult-employer agreements, ncrease the wage dsperson n Denmark and Belgum and reduce t n Span. The effects are very small n Belgum. In relatve terms, frm agreements ncrease the standard devaton of wages by 1% and the percentle wages dfferentals by 3%. The effects are greater n Denmark and n Span. In the former country, sngle-employer agreements ncrease the standard devaton by 7% and the percentle wages dfferentals by 12%. In the latter, sngle-employer agreements reduce the standard devaton by 6% and the percentle wages dfferentals by 7%. The more lmted effects n Belgum may be due to the fact that opposte forces cancel each other out. Frm sze and educaton, for nstance, have hgher returns under frm agreements. It s the opposte for tenure and occupaton. Another explanaton s the strct control over wage settng by the government. Snce 1983, wage cost ncreases n Belgum cannot exceed the average ncrease n the country s man tradng partners. The automatc ndexaton of wages and mult-employer wage ncreases already account for a substantal part of the authorzed wage ncrease. So the small dfference n wage dsperson between sngle and mult-employer agreements can be explaned by the fact that Belgan frms have a small degree of freedom for ther wage polcy. 6. Concluson Ths paper has examned the effect of the barganng regme on the wage structure n Belgum, Denmark and Span, usng a harmonzed matched employer-employee dataset (ES, 1995). These three countres are characterzed by the fact that most workers, rrespectve of ther unon status, are covered by a mult-employer collectve agreement. In Belgum and Denmark, those mult-employer agreements set ndustry or natonal standards for specfed categores of workers that are defned on the bass of a lmted number of crtera such age, experence and occupaton. Then, collectve barganng may occur at the sngleemployer level n order to ncrease wages above the mult-employer standards. Our estmatons show that, n Belgum and Denmark, both the level and the dsperson of wages are hgher for workers covered by sngle-employer agreements, compared to workers covered only by mult-employer agreements. The fact that sngle-employer agreements ncrease wage 17 Another possblty s that wages at the medan are lower under company agreements than under ndustry agreements. 12

15 levels s due to the fact that sngle-employer agreements cannot set worse workng condtons than agreements at the hgher level. The ncrease n wage dsperson may come from two sources. Frst, sngle-employer agreements may ncrease nter-frm wage dfferentals because they take nto account frm specfctes whch are not among the crtera that defne multemployer standards. The comparson of wage equaton estmates between the two regmes does ndeed show that frm sze has a greater effect on wages under sngle-employer agreements. For Belgum, our results are n lne wth Rycx (2003) who fnds a larger dsperson of nter-ndustry wage dfferentals for frms covered by a frm agreement. Second, the presence of a sngle-employer agreement may ncrease the wthn-frm wage dsperson. Ths s lkely because many sngle-employer agreements sgned snce the decentralzaton trend n the 1990s have been ntated by employers n order to ntroduce more pay flexblty and wder wage dfferentals nto ther frms. From the comparson of wage equaton estmates, we fnd larger wage dfferentals between workers wth a dfferent tenure, educaton level, occupaton and gender under sngle-employer agreements n Denmark. The fact that sngle-employer agreements seem to have an mportant postve effect on the wthnfrm wage dsperson n Denmark may be lnked to the generalzed practce of pay-sum barganng. Only the aggregate wage ncrease at frm-level s the object of collectve barganng. Its allocaton among workers s left to the employer who generally prefers a dspersed wage dstrbuton. For Belgum, the effect on the wthn-frm dsperson s uncertan. Although sngle-employer agreements ncrease the return to educaton, they also reduce the return to tenure and the wage dfferentals between occupatons. In Span, sngle-employer agreements consttute a barganng regme ndependent of ndustry agreements. Followng the no competton prncple, the two regmes deal wth the same types of subject and there s no dvson of responsblty between them. Therefore, sngleemployer agreements may set wages above or below ndustry standards. By contrast wth Belgum and Denmark where many sngle-employer agreements are ntated by the employer, the majorty of sngle-employer agreements n Span are ntated by works councls or trade unon delegatons. The average unon densty n frms covered by a sngleemployer agreement s much greater than n frms covered by an ndustry agreement. Therefore, the dfferences n wage structure between the two barganng regmes resemble the dfferences between the unon and the non-unon sector n Anglo-Saxon countres. Hgher wages and lower wage dsperson are found under the sngle-employer barganng regme. The lower wage dsperson seems to result from the reducton n the wage dsperson wthn frms and from the reducton n the nter-frm wage dfferentals. The comparson of wage equaton coeffcents between the two regmes ndeed show lower wage dfferentals between occupatons, gender, tenure and frm sze under the frm agreement regme. The regonal dmenson of collectve barganng may consttute a complementary explanaton to ths compresson effect. Industry agreements have, on the whole, local (regonal or provncal) scope n Span. On the contrary, one sngle frm agreement may apply to establshments located n dfferent regons or provnces. So regonal or provncal wage dfferentals may be larger under ndustry agreements than under sngle-employer agreements. We do ndeed observe that the regonal coeffcents n the frm agreement wage equaton are lower than n the ndustry agreement wage equaton. Our results complete the fndngs of Domnguez and Rodrguez (2004) who fnd that frm agreements compress the wthn-frm wage dsperson n Span. We conclude that sngle-employer agreements are manly used n Denmark and Belgum to adapt pay to the specfctes of the frm and to local economc condtons. In Span, they are manly used by unons to mprove workng condtons and to compress the wage dstrbuton. 13

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